In this sequel to our earlier article, we look at recent developments in the operation of dispute board provisions in multi-tier dispute resolution clauses in standard form construction contracts and how they reflect the shifting landscape of the construction industry.

DISPUTE BOARDS AND MULTI-TIERED DISPUTE RESOLUTION PROCESSES

Multi-tiered dispute resolution mechanisms are popular in large-scale energy and infrastructure projects globally, and dispute boards are a natural fit within this framework by providing efficient and cost-effective dispute resolution and serving as a valuable intervention tool. Two major international projects utilising this mechanism lend credence to this view.

The contract for construction of the Hong Kong International Airport in the late 1980s utilised a quadruple-tiered dispute resolution system[1], of which referral to a Dispute Review Board formed the third. The system was found
to be highly effective, with only one of the six disputes referred making it to the final tier of arbitration[2]. A similar system consisting of a five-member dispute board was used in the Anglo-French Channel Tunnel project
underway in the same era to equal, if not greater, effectiveness – only 13 disputes arose during the course of the project, 12 of which were settled without resorting to arbitration [3]. 

THE ROLE OF AVOIDANCE IN DISPUTE BOARDS

The general concept of dispute boards did not change significantly from its inception until the 2017 FIDIC contracts, which introduced dispute avoidance as a key theme throughout the suite. As a clear statement of intent, the nomenclature of Dispute Adjudication Boards in the 1999 version was revised to Dispute Avoidance/Adjudication Boards (DAAB) in the 2017 suite.

While the multi-tiered dispute resolution process broadly remained the same, the 2017 FIDIC contracts allows DAABs to become a 'one-stop shop' for managing issues and dispute processes alike prior to arbitration (and litigation). To illustrate, under the 2017 FIDIC contracts:

• DAABs are appointed as a 'standing' board at the commencement of the project, as opposed to being appointed ad-hoc under the 1999 FIDIC contracts as and when a dispute arose.
• DAABs are required to hold meetings and/or conduct site visits approximately thrice a year.
• Parties may jointly request assistance from and/or informal meetings with the DAAB to attempt to resolve any issues or disagreements that may arise during the project on a without prejudice basis.

The Singapore Infrastructure Dispute-Management Protocol (SIDP), launched by Singapore's Ministry of Law in October 2018 which recommends it for construction or infrastructure projects of more than S$500 million in
value, adopted the same approach in its multi-tiered dispute resolution process including the requirement to appoint a Dispute Board (DB) at the outset.

Compared to the 2017 FIDIC contracts, the SIDP provides more dispute resolution options before arbitration, offering flexibility in the dispute avoidance process:

• Mediation, where the DB has no power to force a settlement;
• Provision of an Opinion, which is binding but only to the extent it is not objected within 28 days. Once bound, parties must apply to a Tribunal or Court to overturn the Opinion; and
• Rendering of a Decision, which is binding unless overturned by a Tribunal or Court.

Crucially, although the DB is also able to render informal assistance to the parties to resolve any differences, it does not first require an invitation by the parties to do so. The SIDP is silent on what weight any views expressed
by the DB in doing so carries, indicating a clear push for parties to avoid full-blown disputes beyond the initiative introduced by the 2017 FIDIC contracts.

INVEST EARLY IN DISPUTE BOARDS AND CATCH THE WORM

The updated multi-tier dispute resolution clauses in standard contract forms reflects a growing recognition of the value of proactively managing differences through the appointment of a DAAB (or equivalent) panel comprising of industry experts. There are some indications that the avoidance aspect is two-fold: Parties may strive to resolve differences in order to avoid referral to DAABs in the first place (and being judged by their peers). By treating DAABs as part of the project structure from the outset, parties can avoid protracted project delays (and consequently costly arbitration or litigation), making it a worthwhile investment to make.